Economics not such a dismal science

FOR US HIGH SCHOOL STUDENTS

Before you listen to the following broadcast match the expressions in the left column with their translation in the right one.

1. high school student 2. economics 3. federal government 4. report card 5. to take an economics class 6. market economy 7. to deposit money in bank 8. unemployment rate 9. checking account 10. commercial bank 11. to pay the bank's expenses 12. bank's vault 13. to withdraw funds (money) 14. to return on investment

a) прибыль на инвестиции b) учащийся средней школы c) экономика d) отзывать (изымать) деньги (средства) e) федеральное правительство; федеральные власти f) банковское хранилище g) табель успеваемости (отчет школы перед родителями учащегося, периодически направляемый им школой) h) выбирать обучение экономике i) рыночная экономика j) вкладывать (класть на счет) деньги в банк k) оплачивать банковские расходы (издержки) l) уровень безработицы m) текущий счет в банке n) коммерческий банк

 

Listen to the text; answer the questions below using the abovementioned key words.

1. How much do American high school students know about economics? What is the role of economics in our everyday life?

2. What was the main reason for federal government to measure economic understanding among high school students? What were the results of such measurement?

3. What were the three major areas the students answered the questions in? What were the results of such study? When will the next economics testing take place?

4. Let’s answer one of the test questions with the American students. So what does happen to most of the money deposited in checking accounts at a commercial bank? Check the variants: a) It is used to pay the bank's expenses. b) It is loaned to other bank customers. c) It is kept in the bank's vault until depositors withdraw the funds. d) It is paid to owners of the bank as return on their investment. Which is the correct answer?

 

Listen to the text again; check your answers; name the main idea and retell the story.

II. Read and translate the following texts and be ready for their discussion on the basis of active vocabulary, key terms quiz, review and discussion questions.

THE ENVIRONMENT FOR BUSINESS

THEY SAID IT:

“I make money by supplying a public demand. If I break the law, my customers, who number hundreds of the best people in Chicago, are as guilty as I am. The only difference between us is that I sell and they buy. Everybody calls me a racketeer. I call myself a businessman. When I sell liquor, it’s bootlegging. When my patrons serve it on a silver tray on Lake Shore Drive, it’s hospitality.”

Al Capone (1899 -1947); American gangster

 

Business people in all industries need to think seriously about the environment in which they operate and the role that they play in society. It is crucial for business people to monitor trends and developments in the business environment continually. There are five major environmental factors that impact business: competition, regulation, the economy, the social/cultural environment, and technology.

 

THE ENVIRONMENTAL FACTORS IMPACTING BUSINESS
Economic Environment	Competitive Environment	Regulatory Environment	Social and Cultural Environment	Technological Environment

Economic Environment

Economics is the social study of allocating scare resources and is a study of people and their behavior. Economics seek to understand the choices people make in using these scarce resources. We all make economic choices every day when we decide what products to buy, what services to use, and what activities we will fit into our schedules.

There are two sides to the study of economics: microeconomics and macroeconomics. Microeconomics deals with the study of “small” economic units, such as individuals, families, and companies. Although these economic units may be small, their economic choices may be international in scope. Even individual consumers may be involved in international trade by deciding to buy products made in other countries. International trade is thus part of the study of microeconomics. The other branch of economics, macroeconomics, deals with broader issues, like the overall operation of the country’s economy (macro means “large”). Microeconomics addresses questions such as how to maintain adequate supplies of the resources people want. What government policies will be most effective in improving our standard of living over time?

Two important principles of economics, both macro and micro, are supply and demand. Supply refers to sellers’ willingness and ability to provide goods and services for sale in market. Demand refers to buyers’ willingness and ability to purchase these goods and services. The relationship between supply and demand determines another feature: price. As the quantity of a particular product increases, the supply goes up; as the price of that product increases, demand for it goes down. The law of supply and demand states that prices in a market are set by the intersection of these supply and demand curves. The point where the curves meet, known as equilibrium price, is the prevailing market price at which one can buy that item.

Competitive Environment

Traditionally, a firm’s competitiveness depended on its ability to keep its costs down. Today, however, we are seeing a shift from competition based on costs to competition based on many other factors. Let’s examine several competitive issues in an increasingly global economy. These issues include researching and developing better products, improving quality and service, improving the competitiveness of the work force, and improving organizational flexibility.

Researching and Developing (R&D) Better Products. R&D, the scientific process of developing new commercial products, can create totally new industries, and can dramatically change already existing industries (think how computers have transformed so many people’s jobs).

Designing and developing a winning new product is not easy. Only one of every 20-25 ideas ever actually leads to a new product – and out of every 10 or 15 new products, only one becomes a commercial hit. However, companies that invest wisely in R&D are able to develop new products efficiently, before competitors beat them to market.

Improving Quality and Customer Service. Vital to global competitiveness are improvements in product quality and custom service. Says Jack Welch, chief executive of General Electric, “If you can’t meet a word standard of quality at the world’s best price, you’re not even in game.” These improvements have paid off; over the past five years, the firms have reduced by one-third amount of working capital necessary to earn a dollar of sales. Another important aspect of competitiveness is customer service – the aspect of competitive strategy that refers to how a firm treats its customers. Competitive firms make it easy to as possible for customers to order and receive their products.

Improving the Competitiveness of the Work Force. More and more, human resources are replacing factories and machines as a decisive competitive factor. “The only way we can beat the competition is with people,” notes Robert Eaton, CEO of Chrysler. It is important for a company to create a culture that encourages employees to innovate and follow up on new ideas. Companies then must be able to move new ideas through development and into the marketplace quickly. Just adding new equipment is not enough; workers must be able to use it effectively. Employees must be able to control, combine, and supervise world operations, and they must be motivated to provide the best quality and service possible. Indeed, the best way for companies’ employees to prepare for a global economy is to become as educated as possible and to continue that education throughout their lives.

Improving Organizational Flexibility. “Management today has to think like a fighter pilot,” says consultant Fred Wiersems. “When things move so fast, you can’t always make the right decision – so you have to learn to adjust, co correct more quickly.”

Regulatory Environment

Government regulates competition and competitors as well as specific business practices. Government control takes two broad forms: the regulation of industry and enactment statutes. A regulated industry is one in which competition is either limited or eliminated, and government monitoring substitutes for the market controls. Examples of regulated industries are found in public utilities and other industries closely ties to the public interests, where competition would be wasteful or excessive. For example, only one electrical power company can serve a given market. But the lack of competition sometimes can cause deterioration in services and performance. The second form of government regulation, enactment of statutes, has led to both state and federal laws affecting competition and various commercial practices.

Deregulation, the movement toward eliminating legal restraints on competition in various industries, has the potential to reshape the legal environment for business significantly. Deregulation can have a substantial impact on business. Critics of deregulation often point out the negative effects of the trend. Some say deregulation may lead on higher prices as competitors are eliminated. Others suggest safety may be sacrificed in the name of competition.